Investors interested in Technology Services stocks are likely familiar with Trane Technologies (TT) and AppLovin (APP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Trane Technologies and AppLovin have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TT currently has a forward P/E ratio of 26.63, while APP has a forward P/E of 45.47. We also note that TT has a PEG ratio of 2.07. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. APP currently has a PEG ratio of 2.27.
Another notable valuation metric for TT is its P/B ratio of 8.15. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, APP has a P/B of 12.24.
These are just a few of the metrics contributing to TT's Value grade of B and APP's Value grade of C.
Both TT and APP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TT is the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
